Power Pay: Russian company (as predicted) to buy Armenian Electricity Networks

No later than one month from now, Armenia’s power grid will have a new owner. As predicted by analysts and at first denied by authorities, Russian Interenergo BV company, which gained management rights in June plans to buy Armenian Electricity Networks.

When it was announced in June that the Russian group had secured 99-year management rights, it was also speculated that the full intent of Interenergo was to buy out the vital source of revenue.

The paperwork is now being finalized, but the Government of Armenia has given its consent to the sale.

During a press conference, Armenia’s Minister of Energy Armen Movsisyan denied accusations that the deal is made according to political bias or that selling off the energy network weakens the republic’s security.

(When the management agreement was announced, it raised considerable opposition in Armenia, including from foreign agencies who said selling off AEN would sour international relations. See  Power Play)

“Ownership of AEN by a Russian company does not mean that the company will decide how to operate it,” the minister said. “Missions performed within this system are done according to the laws adopted in Armenia, government decisions and normative acts confirmed by the executor. And they are stated in a way that no company’s whim can affect the system, be it RAO UES or any other company.”

According to Movsisyan, current manager Midland Resources stated two weeks ago that it no longer wished to invest in Armenia’s energy system and wished to transfer shares to Interenergo - a subsidiary of Russian RAO UES.

Another subsidiary of RAO UES - Inter RAO UES also proposed to assume the construction of the fifth unit of the Hrazdan thermal power plant (their estimated cost of the project is $250 million), which would supply electricity to Iran in exchange for natural gas.

According to the energy minister, the construction project for the fifth energy unit will be implemented by the Iranian MAP company. The project will cost $150 million and will take two years. The Iranian investment sums will be returned within 10 years in the form of electricity.

The Ministry of Energy rejected Inter RAO UES, and immediately received notice from the Russians that they were terminating their management rights. At the Armenian Nuclear Power Plant three years ahead of schedule, with explanation that the planned financial projects have been realized.

Movsisyan also confirmed the statement recently made by Inter RAO UES Board of Directors Chairman Andrey Rappoport, according to which during the latest consultation of the Armenian Nuclear Power Plant’s directors a report stated that the plant is ready for independent functioning.

“We are ready to stop our management at the nuclear power plant despite the fact that during these years we have ensured and have been financial guarantors of the supply of nuclear fuel. The fuel necessary for the plant will be supplied in such a way until the end of this year,” said Rappoport.

The Armenian Nuclear Power Plant consisting of two energy units, with a total capacity of 815 Megawatts, was halted in 1988. The plant’s second unit with a capacity of 407.5 megawatts was resumed in 1995. And in September 2003, the Nuclear Power Plant was handed over to the Russian Inter RAO UES company for financial management until 2008.

According to Minister Movsisyan, the Armenian side is not in a hurry to reject the Russian company. “It is still us who ask RAO UES to continue its activities at the nuclear power plant.”